The introduction of the ordinal protocol, which enabled the development of Bitcoin-based NFTs, coincided with significant changes in mempool activity and transaction sizes, crypto slate And a glass node show.
What is a Bitcoin Ordinal?
The ability to create non-fungible tokens directly on the Bitcoin blockchain, along with all associated content such as images and videos, is made possible by Ordinal NFTs, also known as Digital Artifacts or Inscriptions.
Launched in January 2023, the Ordinals protocol allows users to interact and exchange individual satoshi, which may contain unique inscribed data. This new approach to creating NFTs with Bitcoin takes advantage of changes included in the Bitcoin Taproot upgrade. This involves putting the full content of NFTs directly on-chain, offering new ways to explore, transfer, and receive such tokens.
Combined with the SEC’s decision to remove Bitcoin from its “security” classification, some experts are beginning to see a bullish outlook for Bitcoin, which could have a positive impact on the cryptocurrency ecosystem as a whole. said.
Quantitative analysis
According to recent Glassnode data, crypto slate, ordinal aftermath had a positive impact on Bitcoin. However, the data suggests that there are factors to consider regarding the “health” of the Bitcoin network. For example, the average transaction size increased by over 100% from 600 B (bytes) to 1100 B.
However, the chart below shows that Ordinal transactions have low satoshi fees (purple is dominant).
Since the collapse of FTX, the total price (in USD value) for transactions waiting in mempool in cohorts of various sizes (vByte) has increased, with the inscription raising the baseline price from 1-4 satoshis. Congestion within Mempool was also caused in part by the increased space required to store ordinal inscriptions compared to standard transaction data. Additionally, the spike in Bitcoin usage during the FTX craze, as investors led the outflow of exchange-held cryptocurrencies, also contributed to the November surge.
Data from Glassnode shows that Bitcoin’s average block size cap has increased significantly since Ordinal’s launch, rising from 1.5-2.0 MB to 3.0-3.5 MB in a matter of weeks. This increase correlates with the fact that larger files such as audio and video are beginning to be stored as ordinals, not just images.
Notably, on February 1st, Inscription 652, the first piece in the Taproot Wizards collection, set a new record as the largest block and transaction in Bitcoin history, reaching 4 MB in size. Additionally, on February 17, CryptoSlate reported on farts uploaded to his Ordinal network. Inscription 2042.
Qualitative analysis
Glassnode notes that while the Ordinal Network has had a significant impact on Bitcoin transaction hash sizes and costs, qualitatively this could be related to a broader crackdown on proof-of-stake mechanisms. is showing.
Most other Layer 1 cryptographic protocols that reference a base layer blockchain with its own native token are built on proof-of-stake consensus mechanisms, including Ethereum.
However, with the SEC crackdown on Kraken’s staking service in the US suggesting that only highly sophisticated retail investors can participate in validating networks of such blockchains, ETH and similar tokens It appears that investing in could become the exclusive domain of institutional investors, leading to improvements in the Ordinal network.
As a result, the Ordinals Protocol has been hailed as a game-changer for the Bitcoin blockchain. By enabling the creation of his Bitcoin-based NFTs, the world’s most famous cryptocurrency has been given a new purpose beyond just facilitating peer-to-peer transactions. This is especially important given that Bitcoin’s mainstream appeal has been hampered by factors such as regulation of the banking system and volatile price fluctuations.
Strong bullish activity seems to be forming around the Ordinal network, as evidenced by the Glassnode data.